How Obamacare Will Help Americans Retire Sooner

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The health reform law will likely help lead to earlier retirements, according to a new paper published in the Journal of Health Economics. The reason for that is pretty simple: Once Americans don’t have to worry about losing their employer-sponsored health insurance, they’ll be freed up to make different decisions about how long to continue working.

In order to reach those conclusions, researchers studied government employees, who have access to retiree health coverage even if they stop working before they’re eligible for Medicare. That flexibility means that public sector workers between the ages of 55 and 59 are about 38 percent more likely to stop working full time, and workers between the ages of 60 and 64 are about 26 percent more likely to stop working full time. In the younger group, access to an alternative source of health care is more likely to facilitate a transition to working part-time. The older group is more likely to retire altogether.

Since Obamacare establishes state-based insurance marketplaces, which gives people a way to access health care other than getting it through their job, the study concludes that it could have a similar effect on retirement decisions among private sector employees. “The research on retiree health programs, including this paper, suggests that the ACA may lead to earlier retirements, particularly for those in the private sector who currently do not have access to subsidized health insurance in retirement before age 65,” the researchers write.

This isn’t a hypothetical demographic. There really are some Americans who are being forced to put off retirement because they’re worried about losing their insurance. According to a 2013 study, more than half of Americans are planning to work longer than they would have otherwise specifically because they want to keep their access to their employer-sponsored health plan. Even wealthier people are increasingly worried about being able to afford health care after they retire.

This is a phenomenon that health policy analysts refer to as “job lock.” Essentially, tying insurance to employment dissuades Americans from switching jobs or leaving the workforce altogether. People end up making employment decisions based on their desire to keep their insurance, rather than making the choices that make the most sense for their careers. It ultimately creates an inefficient labor market.

Obamacare is expected to help ease job lock, although it remains to be seen exactly how this will play out in practice. The Congressional Budget Office recently took a shot at predicting this, projecting that Obamacare will reduce the number of full-time workers by 2.3 million in 2021. Critics tried to make the case that means the health reform law is a job killer, but the authors of the CBO report quickly clarified that’s not exactly what that statistic means. In reality, it’s referring to the people who will have the freedom to cut back on working voluntarily — to pursue part-time work, to spend more time with their families, or to retire.